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Trade Enforcement: Leveling the Playing Field for American Workers and Businesses

HIGHLIGHTS OF THE OBAMA ADMINISTRATION’S TRADE ENFORCEMENT RECORD

Since President Obama was inaugurated in 2009, the United States has filed 20 enforcement complaints at the World Trade Organization (WTO) – the chief world forum for trade enforcement. That’s more than any other WTO Member.

And the United States has won every single one of those disputes that has been decided by the WTO so far.

Export figures and industry estimates confirm that these enforcement wins are worth billions of dollars combined for American farmers and ranchers, manufacturers of high-tech steel, aircraft, and automobiles; solar energy exporters, cutting edge service providers and many others. And keep in mind that every billion dollars of American goods and services exports supports nearly 5,800 jobs.

For example, since 2009 the U.S. has won significant cases that affect aircraft ($18 billion in illegal EU subsidies), autos and SUVs (illegal Chinese taxes on over $5 billion annual U.S. exports), steel (illegal Chinese taxes on exports once worth $250 million annually), agriculture (India’s illegal ban on U.S. poultry), clean energy technologies, services exports, and access to raw materials and rare earth elements that are key to production of advanced electronic products and other high-quality U.S. products.

The Obama Administration has brought 11 trade enforcement challenges against China, three against India, and several other complaints against a series of major economies including Indonesia, Argentina, the Philippines, and the European Union. To ensure the greatest economic benefits for American workers and exporters, the Obama Administration has used our trade enforcement actions to emphasize opening these large, strategic markets to which the United States exports a diverse array of products and services.

The Obama Administration has also leveraged United States resources in new, more effective ways to support trade enforcement actions. In his 2012 State of the Union Address, President Obama announced the creation of the Interagency Trade Enforcement Center (ITEC) run by the U.S. Trade Representative, a first-of-its kind body dedicated to investigating international trade abuses.

In addition to the creation of ITEC, as part of President Obama’s trade enforcement agenda, the United States has collaborated with like-minded trading partners such as Japan and the EU when bringing disputes to the WTO.

Due to our stepped-up trade enforcement efforts, the Obama Administration has significantly increased the rate at which the U.S. brings cases against China.

The United States has also broken new ground on the enforcement of labor rights, including the first-ever case under a trade agreement to seek the enforcement of worker rights. That case challenges Guatemala’s failure to enforce its labor laws.

And in 2011, the United States successfully defended, for the first time ever in the WTO, a trade safeguard to stop disruption of our domestic market, which upheld President Obama's decision to impose tariffs on Chinese tires.

A CONSISTENT RECORD OF SUCCESS

The Obama Administration has built an outstanding record of success on our enforcement filings. Of the 20 complaints filed since 2009, the U.S. has won every one that has been decided so far. The U.S. has also settled one case on favorable grounds while the remaining complaints are pending.

Over the last two years, the U.S. has won eight major victories affecting billions of dollars of U.S. exports:

In July 2015, the United States prevailed in a WTO challenge to China’s compliance actions following WTO findings in 2012 that China’s duties on high-tech steel were inconsistent with WTO rules – duties that contributed to over $250 million in annual export losses for American steel exporters. The compliance challenge was the first time any WTO Member had initiated a WTO proceeding to challenge a claim by China that it had complied with adverse WTO findings. The United States took the unprecedented step of challenging China’s claim to ensure that China lived up to its WTO obligations and stopped misusing trade remedies in a manner that harmed American workers and businesses.

In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza. The reports of the WTO panel and Appellate Body agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without a scientific risk assessment.

In May 2015, the United States, the European Union, and Japan successfully challenged China’s export duties and quotas on rare-earth elements as contrary to WTO rules, delivering a major enforcement victory. Last year, the WTO agreed with the United States in a major dispute, finding in favor of U.S. claims that China’s imposition of export quotas and duties on rare earths, tungsten, and molybdenum breached WTO rules. In 2014, the WTO agreed with the United States in a major dispute, finding in favor of U.S. claims that China’s imposition of export quotas and duties on rare earths, tungsten, and molybdenum breached WTO rules.

In January 2015, the WTO found in favor of the United States in a dispute challenging Argentina’s widespread restrictions on the importation of U.S. goods. The measures potentially affect billions of dollars in U.S. exports each year in job-creating industries, including energy products, electronics and machinery, aerospace and parts, pharmaceuticals, precision instruments and medical devices, miscellaneous chemicals, motor vehicles and vehicle parts, and agricultural products.

In October 2014, a WTO panel found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza. The panel agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without sufficient scientific evidence.

In August 2014, a WTO panel found in favor of the U.S. in a dispute challenging Argentina’s widespread restriction on the importation of U.S. goods. The measures potentially affect billions of dollars in U.S. exports each year in job-creating industries in states across the country including energy products, electronics and machinery, aerospace and parts, pharmaceuticals, precision instruments and medical devices, miscellaneous chemicals, motor vehicles and vehicle parts, and agricultural products. The WTO finding was upheld by the WTO appellate body in January 2015.

In August 2014, the WTO found that China breached WTO rules by imposing duties and quotas on exports of rare earths, tungsten, and molybdenum in a case brought by the Obama Administration. Those export restraints promote China’s own industry and discriminate against U.S. companies using those materials, which are key inputs by critical American manufacturing sectors, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals.

In June 2014, the WTO found that China breached WTO rules by imposing unjustified extra duties on American cars and SUVs in a case brought by the Obama Administration. In 2013, an estimated $5.1 billion of U.S. auto exports were covered by those duties.

IMPACT ON AMERICAN WORKERS, BUSINESSES AND FARMERS

The Obama Administration’s unprecedented enforcement efforts will benefit American workers and businesses by leveling the playing field and by demonstrating our commitment to upholding trade rules to support future American economic growth and jobs. This takes on even greater meaning once we have finalized cutting-edge new trade agreements like the Trans-Pacific Partnership that play to American advantages and contain the strongest labor and environmental standards in history. For example:

98% of the American companies that export are small and medium-sized businesses, which are a primary driver of job creation in the United States. However, small businesses often lack the resources to take on unfair trade barriers. Therefore, President Obama has targeted trade enforcement cases to take on policies that are specifically harmful to our small business exporters, such as burdensome agricultural and technical regulations, restrictive licensing requirements, and limits on American auto parts manufacturers.

The U.S. case targeting the European Union’s Airbus subsidies will bring enormous benefits to American aerospace workers and companies of all sizes by bringing about a more level playing field and limits on new civil-aircraft subsidy programs.

The U.S. case against Chinese restrictions on electronic payment services establishes the value of WTO commitments to open markets for services trade and the digital world.

Through the case against Chinese export restraints on rare earths, the Administration is striving to provide major benefits to U.S. high-tech industries that make use of these important inputs.

The case against India’s solar-energy local content rules is aimed at localization policies adopted by India that discriminate against U.S. products, creating a financial incentive for Indian solar power developers to buy Indian products and for producers of solar cells and modules to move operations to India.

The case filed against Guatemalan labor practices under the CAFTA-DR sends the strong signal that the United States will use the full range of tools at our disposal, including formal dispute settlement, to ensure that workers’ rights are protected.

Several cases offer especially important economic impacts for small and medium-sized businesses. These include WTO challenges against Chinese export subsidies for makers of auto parts, hardware and building materials, furniture, and ceramics, Indian use of non-science-based import restrictions to block poultry imports, and unfair import licensing rules in Argentina.

Presidential Safeguard Action on Tires from China: In September 2009, President Obama directed the imposition for three years of additional tariffs to stop a harmful surge of imports of Chinese tires for passenger cars and light trucks. The surge caused production of U.S. tires to drop, domestic tire plants to close, and Americans to lose their jobs. Acting on behalf of American manufacturers and workers, President Obama invoked a law that had never before been used to give the United States the right under WTO rules to address harm caused by imports from China. USTR successfully defended China’s WTO challenge to the President’s action, resulting in WTO findings that rejected China’s challenge in its entirety.

Chinese AD/CVD Duties on Autos from the United States: In July 2012, USTR challenged China’s anti-dumping and countervailing duties on certain automobiles from the United States. The WTO agreed with the United States that China’s duties breached numerous international trade rules. Following the U.S. challenge and before issuance of the panel’s report, China announced the termination of its AD and CVD duties. In 2013, those duties had been imposed on exports of over $5 billion of American-made cars and sport-utility vehicles (SUVs). Through this dispute, the Administration is ensuring the right of American companies to fair treatment in antidumping and countervailing duty investigations in China.

Export Restraints on Rare Earths: In March 2012, the United States challenged China’s export restraints on rare earths, tungsten and molybdenum products. China is the world’s leading producer of rare earths, producing an estimated 130,000 metric tons of rare earth oxide, which accounted for approximately 97 percent of global production in 2011. In all, China’s export restraints on the materials at issue in this dispute cover approximately 100 tariff codes. The United States brought this dispute to create a level playing field for U.S. workers and businesses that manufacture many important downstream products in the United States, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals. In late 2014, the WTO agreed with the United States and found that China’s export restraints are inconsistent with WTO rules. China announced that it has eliminated WTO-inconsistent export duties and quotas on these products. The United States is closely monitoring China’s actions to ensure that these illegal policies are in fact discontinued and that China fully complies with its obligations.

Export Restraints on Raw Materials: In June 2009, the United States challenged China’s export restraints on nine raw materials to create a level playing field for U.S. workers and businesses that manufacture downstream products in the steel, aluminum and chemical sectors. The export restraints enabled China's downstream producers to obtain a dramatic competitive advantage by significantly decreasing their input costs. For example, in 2008, the input cost for coke was 36 percent less for Chinese domestic steel producers than their foreign counterparts. In 2011, the WTO found China’s quotas and duties to be inconsistent with its WTO commitments. In December 2012, China eliminated the offending measures.

Chinese AD/CVD Duties on High Tech Steel from the United States: In September 2010, the United States challenged China's imposition of antidumping (AD) and countervailing duties (CVD) against U.S. exports of grain oriented flat-rolled electrical steel (GOES). This action cut off more than $250 million in U.S. exports of this high-tech steel product. In July 2012, the WTO found China’s measures to be inconsistent with its WTO commitments. In 2014, USTR challenged China’s failure to comply with WTO rules in the WTO’s first ever compliance proceeding brought against China. The WTO concluded that China’s actions following the WTO findings in 2012 were inconsistent with WTO rules. China revoked the AD and CVD duties on GOES from the United States.

Electronic Payment Services: In September 2010, the United States challenged China’s restrictions and requirements on electronic payment services (EPS) for payment card transactions and the suppliers of those services. Each year well over one $1 trillion worth of electronic payment card transactions are processed in China. In 2012, the WTO agreed with the United States that China’s measures discriminate against U.S. suppliers. China has taken some steps to address the problems identified by the WTO, and the Administration continues to work with U.S. stakeholders and China to ensure American credit and debit card companies’ fair access to China’s market.

Wind Power Equipment:In December 2010, following a petition from the United Steelworkers, the United States initiated a WTO case challenging subsidies that China provided to manufacturers in its wind power equipment sector. The subsidies appeared to require the use of local content, at the expense of foreign manufacturers’ products. At the time of the dispute, grants provided under this program from 2008 to 2010 totaled several hundred million dollars. In response to USTR’s challenge, China terminated the challenged subsidy program.

Chinese AD/CVD Duties on Poultry from the United States: In September 2011, the United States challenged China’s AD/CVD duties on U.S. exports of chicken “broiler products.” According to industry estimates at the time, the U.S. poultry industry stood to lose approximately $1 billion in sales to China by the end of 2011. In June 2013, the WTO agreed that China’s measures were inconsistent with its WTO commitments. China issued a new measure in response to the WTO finding in 2014. The United States is reviewing that measure.

Chinese Export Bases for Autos and Auto Parts: In September 2012, the United States challenged a Chinese export subsidies program to auto and auto parts enterprises in China that severely distort competition. In the years 2002 through 2011, the value of China’s exports of autos and auto parts increased more than nine-fold, from $7.4 billion to $69.1 billion, and China rose from the world’s 16th largest to the 5th largest auto and auto parts exporter during this period. U.S. efforts to address this important program are ongoing.

China Demonstration Bases for Common Service Platform: In February 2015, USTR requested WTO consultations on China’s measures that appear to establish a program of prohibited export subsidies. China is directing a variety of service providers to offer discounted or free services to producers across a wide range of industries, including agriculture, light industry, new materials (including ferrous and non-ferrous alloys), pharmaceuticals, textiles, hardware and building materials, and specialty chemicals. These producers are clustered in designated export regions called “Demonstration Bases.” In addition, producers may also receive subsidies such as cash grants, grants for research and development, subsidies to pay interest on loans, and preferential tax treatment for exporting. The WTO established the dispute settlement panel in April 2015 at the request of the United States. Through this action, USTR is challenging Chinese subsidies that provide an unfair advantage to businesses located in China, distorting competition with American-made products.

India

Ban on U.S. Agriculture Exports: In June 2015, the WTO found in favor of the United States in a dispute challenging India’s ban on various U.S. agricultural products – such as poultry meat, eggs, and live pigs – allegedly to protect against avian influenza. The reports of the WTO panel and Appellate Body agreed with the United States that India’s ban breached numerous international trade rules, including because it was imposed without a scientific risk assessment. The U.S. poultry industry, which employs over 350,000 workers and consists of nearly 50,000 family farms, has been particularly affected by India’s restrictions. The industry estimated that U.S. exports to India of just poultry meat alone could exceed $300 million a year once India’s restrictions were removed – and exports are likely to grow substantially in the future as India’s demand for high quality protein increases. India and the United States are discussing the period of time for India to comply with WTO rules.

Argentina

Restrictions on U.S. Goods Exports: In January 2015, the WTO found in favor of the United States in a dispute challenging Argentina’s widespread restrictions on the importation of U.S. goods. The measures potentially affect billions of dollars in U.S. exports each year in job-creating industries, including energy products, electronics and machinery, aerospace and parts, pharmaceuticals, precision instruments and medical devices, miscellaneous chemicals, motor vehicles and vehicle parts, and agricultural products. Argentina has until December 31, 2015, to bring its import regime into compliance with WTO rules.

The Philippines

In 2012, the WTO adopted panel and appellate findings agreeing with the United States that Philippine excise taxes on imported distilled spirits were discriminatory and inconsistent with the Philippines’ WTO obligations. The Philippines had imposed taxes on imported distilled spirits, such as whiskey and gin, at approximately ten to forty times higher than those applied to domestic products. The Philippines implemented a new system that went into effect in January 2013, which removed the raw materials requirement that was the basis for discrimination.